An Informed Homeowner Is a Prepared Homeowner
Whether you’re planning to buy or sell this year (or even in the coming years), it’s important to keep up with housing market trends so you can act when you’ll reap the greatest benefits. We’ve looked at some trends that began last year and some projections from industry experts for this year to help you make an informed decision and make your move at the right time.
Appreciation and Equity
When a property’s value rises since its purchase, it’s said to have appreciated. This helps homeowners build what is known as equity, or the amount of home you actually own. According to CoreLogic®, a data and analytics company, properties that have a mortgage increased in equity about 12.3% from Q2 2017 to Q2 2018. That might not sound like much, but it represents a collective equity gain of nearly $1 trillion across the U.S.
ATTOM Data Solutions, a property database management company, in its Home Equity & Underwater Report, showed that in Q3 2018, almost 25.7% of U.S. properties with mortgages were “equity rich” — that is, the property’s value is estimated at more than 50% of its mortgage. That’s a record high!
So what does that mean for you? If you’re selling your home, and you have equity built up, more equity means you may have more cash left over after paying off your mortgage to put down on a new home (or to do anything else you might want, really). Homeownership may also come with tax-saving deductions that could serve to slightly offset higher prices.*
Experts seem to think that interest rates will continue to rise this year. Freddie Mac has predicted rates will approach 5.5% as the year goes on, and it's possible that the Federal Reserve could continue to hike rates in 2019. Realtor.com® also concurs that higher rates are coming. While this sounds like a real negative, it’s important to remember that rates are still at historic lows. Plus, rising rates are a sign of a strong economy, which could indicate a rise in wages is on the horizon. Be that as it may, if you’re planning to buy in 2019, you may be better off acting sooner rather than later, depending on the community in which you live. When rates go up, you may see a reduction in your purchasing power.
It’s been a seller’s market for some time now. The number of available, desirable homes has been an issue for the last year, and as rates rise, that issue could worsen. Often when home shoppers see a trend of rising rates, they’ll rush to buy before rates can climb any higher, thus further reducing the number of available homes for sale. According to Kiplinger®, Q4 2018 saw inventory near historic lows, and properties sold faster in September 2018 than they did the same time a year ago. This spurs home values and sales prices to climb, although the rise in rates may have acted to slow down the rise of home values somewhat.
For some home sellers, this has been a benefit, as they can sell their homes more quickly for higher prices, especially in cities where the competition has been fierce. This sounds like potential homebuyers may be at a disadvantage, but the good news is that while inventory was extremely low in 2018, it has been slowly climbing in markets across the country. For instance, Realtor.com reported that new listings increased 4% in October 2018 from the year prior. In a separate report from Trulia, data showed that housing inventory steadily increased throughout 2018, and while inventory was still down compared to 2017, total inventory fell just 2.5% year-over-year. For homebuyers, an increase in inventory should help slow price growth and hopefully put a new home within reach.
Do you want to know more about the housing industry and track trends that may affect your ability to buy or sell this year? These publications — most of them online — will provide insight into the housing market and help you educate yourself on where it’s heading.
Realtor® Magazine — from the National Association of Realtors® (NAR)
Real Estate Magazine — strategy, business insights, industry info
Zillow Research — numbers, news, and stories
Curbed, NextDoor, and Patch — for local real estate news and trends
Realty Times — daily industry newsletter
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*We are not a tax advisory firm. The information contained in this article is for informational purposes only and may not reflect current tax year rules and regulations. Consult your tax advisor or the IRS for current tax year rules, restrictions, and regulations.